Commercial Real Estate Broker Splits. Stealing From The Rich To Get Rich.

Commercial Real Estate Broker Splits. Stealing From The Rich To Get Rich.

I don’t think there is too much secrecy about the commercial real estate brokerage model.

A typical brokerage has most of it’s “brokers” on a 50/50 split.

It starts at 50/50 up to a certain level of revenue and then it usually escalates to 60/40 and then to 70/30.

But there is, of course, a “desk fee.” Depending on who you ask and what market you are in that can run from 20-50 thousand dollars a year.

So just to be “at the company” it’s salty to even hang your license.

Most brokers pay for their marketing and tools….unless they have to use “the companies” internal platform. Which of course they pay for.

It still amazes me how often I’m asked what it takes to get started in commercial real estate. People want in.

They see those big numbers attached to the deals and transactions then do a simple math equation. It makes their skin tingle.

I wonder how profitable commercial real estate brokerages are compared to say a residential brokerage?

The key component for the big hitter commercial real estate brokerages is to use those transactions to create income from asset management. It’s a kick ass model don’t get me wrong. Residential can’t get near that; they have no chance.

It makes you think. Are the brokerage pieces of commercial real estate a profit center for the companies overall?

So if they are then why the draconian splits.

What are the real sources of overhead? Office space. Technology tools. Staff. Could the cost of business be that much?

Yea, I know the one big cost for most is The Dark Star.

Yes, I know that inventory and data control = market share or, at least, the ability to compete for it. Without it is there no chance?

Big hitter brokerages use the argument that you are you because we made you. The minute you leave you are no longer the big hitter we made you. Therefore, that’s why we take the split. It’s “found” money to you. Without our brand, there is no deal.

You could put up the argument that the people make the brand. And I’m sure that’s what you would hear from most of the top executives. “it’s our people that make our company great.” Then why not pay them as the valuable assets they are?

“It dosesn’t help the bottom line?” I’ve heard certain people call brokerage offices “cost centers.” It doesn’t sound like any humans are there. It sounds like a place where the money goes from the corporate office to burn.

If you hear that someone is on a greater split, there is the perception that they are somehow less of a professional. Think about that. That is fucking brilliant marketing from the people who control the splits. You make more but are a worse professional for doing so.

Can’t believe I’m doing this but using a sports metaphor to help explain my point.

If Mike Trout and Bryce Harper were to perform the same and be as many, believe two of the best in the game and are paid for that performance (according to the CRE thought process) they are the two worse professionals in baseball. Let me repeat that. They are two of the best and make the most money, but they SUCK as professionals because they are so damn good and get paid.

Sounds absurd.

It is absurd.

BUT not in commercial real estate.

I’m going to call Bryce Harper and say “bro, you are one of the best, but you are killing the game because you make so much money. Next year we go back to the minimum base salary of all baseball and see if you can do it again. Oh, and, by the way, I’m going to take half of all your money because I own the field the bats and the balls.”

What do you think his reaction would be? You can probably figure that out yourself.

“But, but, but Duke that’s not our system. That’s not how it works.”

(If you own a brokerage right now how fast and hard are you going to try and make sure none of the people in your office read this.)

You know what you’re wrong. The system is already in place and seems to be working just fine.

Still stumped?

It’s called residential real estate.

Think of the biggest hitter residential broker in your market. What is the split that he or she is on?

I’m pretty sure it’s 90/10 with marketing credits and incentives to bring in even more deals.

Take a guess at what kind of money these people are making in let’s say the big markets on the east and west coasts.

Do the math. Do the math with your production from last year.

That’s how much more money they are putting in their pocket that you do not.

Don’t bullshit me with the structure of the deal and the data being so much different.

Do you know that there is NO MLS system in New York?

NO MLS in New York.

How in the hell do they do it?

They do it pretty damn well in one of if not the biggest real estate markets in the world.

And they make bank. Major League Bank!

Access to inventory my ass!

I have yet to see any justification for the present system…….other than pure greed and profit.

Is that just doing the business of business?

How about this?

Walk into your managing brokers office and ask to see the books.

The real books. The one’s they show the IRS.

What do you think that reaction will be?

How much money are you making “the company.”

Of course, they pay for things. They pay for things with your money.

Side story: Guy does the most business in the office, and gets’s recognised for being the number one user of the companies tools and assets. The company makes $150K profit from that use. The guy gets a plaque and a $25 Starbucks card.

When you go home, tonight sit down and add up your dollars taken home over the last five years.

Do the math.

If you were on a 90/10 split instead of the industry standard all that time what is that number?

It’s a HUGE number.

Write that number in bold on a clean sheet of paper and show it to your significant other.

Tell them this is what you left on the table…..for the company to keep instead of you.

Don’t have the balls to do it?

That’s the problem, and you don’t even realise it because…

Commercial Real Estate Broker Splits. Stealing From The Rich To Get Rich.

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